+Tata Steel (Buy, TP: Rs 450(+21%) Contra Call & Highest on the street PhillipCapital Update For our detailed report dated 4 TH August Click here

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1 16th August +Tata Steel : Further Anti dumping duties on HRC by Europe to provide upside risk to Earning for Tata Steel Europe: Maintain buy with TP Rs 450 As per Reuter article HRC duties could be in the range of 20 30% 5th August Subject: Contra Call & TP Highest on the street TATA Steel TP Rs 450, Read Why!! PhillipCapital Sales Worth Analysing what the Street have to say on TATA Steel Followed by Phillip Capital Update with a TP of Rs 450 Data Shows Out of 38 Analysts tracking Tata Steel, only 25% have a Buy!! While, Net Income Estimates by Analysts have been Upgraded!! i.e. 6 Analysts have Upraded Estimates by ~ 14% **Feb 2016; Consensus TP revised 50% from 206 in Feb to Rs 315 now in August That said street still in disbelief as the ratings have not changed and 75% of the Analysts continue to remains Sell/Hold. ** Reiterate Conviction Buy with TP Rs 450; *Expect more Upgrades on street +Tata Steel (Buy, TP: Rs 450(+21%) Contra Call & Highest on the street PhillipCapital Update For our detailed report dated 4 TH August Click here Europe back in focus: Improving European spreads and ongoing restructuring in that geography will be drivers of higher profitability, We reivse Op/tn tp $75 from 45$ earier. Op Pat est by 8%/7% for FY17/18 to factor in strong profits from Europe. European steel spreads have seen a sharp improvement of ~US$ 90 since February 2016, in line with the movement in Chinese prices; this will benefit Ijmuiden and Port Talbot plants profits Indian operations profitability to pick up after mid Q3FY17. Steel prices in India have started cooling off after a sharp rally over February May 2016 after the MIP was implemented. We view the recent price fall as seasonal, and expect prices to start recovering after mid FY17 aided by firm global prices. Stock has rallied more than 70% from its recent lows in February 2016, in our opinion the CMP does not fully capture the potential profitability of its European operations, which we believe will surprise the street. Asset sales and focus on deleveraging will be added triggers. Our revised EPS est for FY17/18 are Rs 51/65 (Rs 38/53 earlier). Retain Buy with a TP of Rs x avg FY17 & 18E. Page 1

2 4 th August +Steel (TATA TP Rs 375 +JSW TP Rs 1930)/ SAIL, Bhushan & Uttam Galva: DG Anti Dumping has concluded provisional studies on CRC as well DG Anti dumping completes provisional studies on CRC. They have recommended $595 as a reference price compared to MIP of $ Majority of price hikes are expected from Q3 once the demand starts reviving. are other key beneficiaries. 3rd August +Steel (TATA TP Rs 375 +JSW TP Rs 1930): DG Anti Dumping has concluded provisional studies on HRC, Plates & Sheets, which is higher then MIP, Maintain Buy CNBC stated Provisional duty order expected this week. Proposed reference price for HRC $474 and $575 for sheets & plates. This is higher than MIP price. MIP discontinuation will not have any major impact with other protectionist measures being implemented. However subdued demand will limit price hikes in near term. 11 th July ++Tata Steel : cancels UK sale; but exploring JV with Thyssenkrupp : Buy with TP Rs 375 Tata Steel : Cancels UK sale looks at cutting cost by 100mn. Tata is exploring JV with Thyssenkrupp for its entire European operations, however the talks are at initial stages. While the sale cancellation is negative, the JV with Thyssenkrupp will still see the deleveraging process go through. We continue to remain buyers on the stock given the sharp expansion in European spreads. The JV if sealed through, it will be an added trigger for the stock. Tata Steel will also initiate the process to sell it's Specialty Steel business & Hartlepool mills in UK separately. These have a capacity of 0.8mn tonnes and run independent of the UK Strip business. 28th June Tata risk reward very much favorable: We firmly believe it s time to buy for Tgt of Rs375 (22% upside & more if UK asset sale happens) ** Price surge in Europe & in domestic markets to drive profitability in Q1FY17 Yet to reflect in realisations & stock price Europe prices are up 40% (Eur 120/te) since Apr 2016 Domestic Prices are up by 25% (+Rs6000/te) since Feb 2016; because of MIP and antidumping duty As a reflection of price hike in Europe Arcelor (MT US) stock price is up 80% Tata Steel on the other hand is up 20% the same period This price rise is yet to reflect in company realizations & should be seen in Q1 and Q2Fy17. Pl chk Q4 results review for details. Click here Page 2

3 ** Despite Brexit bidder continue to show interest in Tata UK assets while Thysenkrupp is likely to form a JV for the Europe operations: Needless to say that any action related to Tata UK will be seen as positive as it reduces the debt burden and would improve profitability at consolidated levels. ** Kalinganagar plant production is expected to be 1mn te which would improve consolidated numbers as it reduces the proportion of Tata Europe in the consolidated nos. ** Company on asset sale spree Scunthorpe is done: Tata Steel announced signing of agreement with Greybull Capital to sell its Long Product business in Europe (LPE). This starts a new journey for Tata Steel which will see the company offload various assets which substantially dragged its profitability. This deal bolsters the case for sale other assets (UK & Europe). Read more on this deal Click here ** Risk Factor: If MIP or anti dumping duty is reversed by the government then prices correction in domestic markets could be sharp and severe, posing a risk to FY17 earnings. 26 th May + Tata Steel (Maintain Buy TP Rs 385) Q4FY16: Strong performance overall; further improvements expected Standalone numbers performed due to higher volumes and lower cost. volumes stood at 2.72mn tonnes, 10% above estimates. Realisations stood at Rs 36216, 2.8% below estimates. Average realisation was almost flat on qoq basis Company has guided Rs 3000/tn increase in realisations in Q1FY17 for standalone operations Net profit 10% below estimates due to exceptional expense (Rs 3.3bn) pertaining to provision for employee separation scheme. Adjusted net profit was 35% ahead of our estimates. Europe higher deliveries despite lower realizations. Operating loss per tonne stood at US$ 15 compared to our estimate of US$ 25, hence beat to estimated loss (est loss was USD84Mln reported USD 54mln) Consolidated: Revenues in line a Rs291.6bn, with slight miss on SEA revenues. Higher standalone profits and lower than expected Europe losses were further aided by other subsidiaries contributing Rs 3.7bn which led to the beat the estimate by operating profits by 48% to Rs22bn. Exceptional items amounting to Rs 28.6bn impacted, adjusting to which net losses were 59% lower than estimates, ie reported net loss of Rs32.1bn vs est of Rs.8.4bln 25 th May Tata Steel Q4 Nos today Preview (CONCALL AT 8:30PM IST Dial in nos details yet to get..) ** 'D Day' for Steel Industry as Tata Board Meets to Decide Fate of Its UK Plants BBRG NEWS * Expect topline to be driven by hike in prices after MIP (avg hike Rs1000) & marginal volume growth. * Expect Ebitda/tonne of Rs7573 from Rs6378 in Q3FY16. Standalone MAR 16E DEC 15 MAR 15 QoQ YoY Revenue 97.41b 89.91b b 8.3% 7.4% EBITDA 18.68b 14.98b 16.79b 24.7% 11.2% EBITDAS Mar 19.2% 16.7% 16.0% PAT 7.38b 4.53b 8.14b 62.9% 9.4% EPS (Rs) * European operations will continue to draff ; however losses cud be LOWER due to less restructuring expenses. * Expect per tonne Ebitda loss down to US$25 from US$31 on qoq for European operation. * SEA profits are expected to be stable at US$ 12/tonne. Consolidated MAR 16E DEC 15 MAR 15 QoQ YoY Revenue b b b 4.4% 12.9% EBITDA 14.93b 7.76b 15.43b 92.5% 3.2% EBITDA Mar 5.1% 2.8% 4.6% Page 3

4 PAT 8.6b 21.27b 56.74b 59.6% 84.8% EPS (Rs) Regards Shubhangi 23 th May Our Stance: BUY JSW Steel (TP Rs 1500) + Tata Steel (TP Rs 385) We have been Re iterating our positive stance on the Steel sector regularly in our morning notes. (PFA trail mail of our Updates). **JSW Steel: TP Rs 1500(+13%); JSW Steel not to bid for TATA Europe (media)! a big ve overhang on JSW steel will be gone; Await more clarity from the management; Anyway we were certain that JSW may not bid very aggressively for Tata Europe, still an overhang will be gone. Please find the link: bidders for tata steels uk biz to submitbinding bids today_ html Recent reports on JSW Steel: 19th May: performance; significantly beats on consensus, For detailed report Click here 6 th May For detailed report Click here **Tata steel: Buy TP Rs385(+20%) Higher probability of UK asset sale: +TATA Steel Reiterate our positive stance: Media reports suggest Excalibur is considering joining the race to acquire TATA's UK assets. News also suggests Liberty House and Excalibur Steel will join hands and bid together, making It stronger than the other bidders in the race (namely Newcore Steel, Greybull Capital, JSW Steel, Hebei Iron & Steel). As per the article link above: Newcore Steel and Hebei have backed out as well as sources ssuggest JSW Steel will not be submitting a binding bid today With the meeting scheduled on 25 TH Monday, we should get arrive at the final stance. 19 th May We have been Re iterating our positive stance on the Steel sector regularly in our morning notes. (PFA trail mail of our Updates). Finally with JSW steel s result out, our stand gets vindicated with regards to the benefits which the companies will accrue from the steel price hikes. The benefits are expected to start accruing from Q1FY17 onwards driving operational improvements. Further the companies are also expected to benefit from company specific events (UK asset sale for Tata Steel & Category C iron ore mine auctions for JSW Steel) which will further drive the valuations higher. 19 th May +JSW Steel, Maintain buy with TP Rs 1500: Strong performance; significantly beats on consensus, For detailed report Click here FY17 sales guidance: 15mn tn vs est of 14.4mn tn, We have assumed 14.8 mln ton We expect company may post Rs Operating profit per ton(fy17e We have assumed Rs 8000 per ton) in Q1 vs Rs 5400 per ton in Q4 FY16/. Which will be led by Rs 3300 pice hike in FY17E Standalone:Sales: Rs 93.6bn, 3% vs est, Sales vol: 3.28mt, in line, Realisation: Rs 28514, up Rs 250 qoq, 3% vs est, OP: Rs 17.7bn, +10% vs est, Ebidta/tn: Rs 5403, +10% vs est,pat: Rs 3.7bn, +37% vs est Consolidated: Sales: Rs 104.7bn, 1% vs est, OP: Rs 18.2bn, +8% vs est,et Profit: Rs 1.7bn vs est of Rs 390mn 10th May + Tata steel (BUY with PO Rs 385):: Higher probability of UK asset sale as 7 bidders in fray + UK Govt to share Pension liability 7 expressions of interest for entire UK asset sale into next stage/ UK government may assume some pension liabilities Page 4

5 These potential bidders will now undertake further due diligence. As per a media report, JSW Steel is one of the seven bidders. This continues the positive news flows from the UK asset sale in time bound manner allaying earlier fear of time uncertainty UK government may bear upto 60% of 5bn Tata Steel UK operation's pension. The quantum of liabilities to be assumed by UK govt will vary from asset to asset. This comes in as a big relief given pension liabilities were the biggest deterrent for the for the UK asset sale. This will expedite the sale process of UK assets 9 th May +Tata Steel: Media UK government may bear upto 60% of 5bn Tata Steel UK operation's pension. The quantum of liabilities to be assumed by UK govt will vary from asset to asset. This comes in as a big relief given pension liabilities were the biggest deterrent for the UK asset sale. This will expidite the sale process of UK assets 9 th May + JSW Steel: Finally some integration coming its way, Maintain Buy, Upgrade TP Rs 1500(+14%) from Rs 1360 previously; For detailed report Click here Moreover, the long awaited Category C 14 iron mine auctions with 196 mn ton of res in Karnataka will be a future driver for the stock. JSW Steel to be biggest beneficiary as is well placed to win 11 mines with EC of 8.4mn tonnes (62% Fe equivalent) given the location.this can act as an upside trigger to our estimates. Export shipments can increase with a surge in global steel prices, This will help utilise the recently commissioned expansions (to 18mn tonnes from 14mn tonnes) at all its locations We raise our FY17/18 operating profit estimates by 4% and EPS by 8%/9% to Rs155/170 factor in higherthan expected steel price hikes in the domestic market. Sharp jump in international prices will also aid export shipments. At a CMP of Rs 1321, the stock trades at 9x/8x our FY17/18 EPS and at an EV/EBIDTA of 5.7x/4.9x. While the steel price jump has been a major driver, we believe upcoming iron ore auctions will add to the positive momentum (not yet factored in our assumptions). 5th May +ve Steel: Steel producers further hike flat product prices by Rs /tn: Will see earnings upgrades Sail has hiked prices by Rs 1000 while JSW hiked by Rs TMT prices are left unchanged. This is line with expectations post our dealer interactions highlighted this week.post this hike, overall flat product prices are up by ~Rs 5500 since MIP, higher than our assumptions. 2nd May + Channel Check suggest Steel Price Hike: Steel: Maintain Buy on JSW Steel & Tata Steel Dealer checks suggest Rs 1000 price hike expected across products except for TMT (weak demand impacting). Higher international prices drives the said hike unlike previous ones (driven by MIP). Flat dealers have already increased Inventory in anticipation of the hike. Overall demand continues to be weak at higher prices but export orders will see higher volume for Steel companies. We will upgrade our Steel price assumption given the hikes already taken (Rs ) are above our assumption of Rs Tata steel: Higher probability of UK asset sale: Buy TP Rs385 Liberty House confirms that it will bid for Tata steel UK s arm and is working with Macquarie for potential source of funding. This development raises the probability of UK asset sale. In addition to the buoyancy in steel; prices we remain positive on TATA Steel on these events and reiterate Buy with TP Of Rs385/sh Courtesy: Analyst: Dhawal Doshi Tel: (D), (M) Page 5